Hemp / CBD

Starting a New Hemp Business

McAllister Garfield, P.C. has represented hemp and CBD businesses for several years, including some of the pioneers in the industry. Our firm assists hemp and CBD businesses from start up to exit by incorporating companies, assisting companies in raising money, drafting business transaction documents and commercial leases, and by providing legal advice on how to obtain all required licenses. Beyond start-up, the Firm helps clients understand and maintain full compliance with state and federal rules in this highly regulated industry. The following is a general summary of hemp law. This summary is educational information only, does not create an attorney client relationship between the firm and the reader, and is not final legal advice. Prior to engaging in any activity discussed below, consult with an attorney regarding the risks and opportunities.

I. Federal Hemp Law

In 2018 Congress passed the Farm Bill, which legalized hemp as an agricultural commodity in the United States. The Farm Bill defines industrial hemp as any part of the plant Cannabis Sativa L. possessing no more than 0.3% THC by weight. The Farm Bill’s definition of hemp includes extracts from hemp like cannabidiol or CBD and other cannabinoids. Hemp and CBD derived from hemp are no longer controlled substances under federal law.

The Farm Bill created a framework for hemp cultivation in the United States and subsequent sale of hemp products. States and tribal governments may choose to regulate hemp production, or, if they decline to do so, the United States Department of Agriculture will regulate the production of hemp throughout the United States. Under the Farm Bill, private growers may produce hemp and hemp products free from federal interference. The Farm Bill requires that hemp producers obtain a license from their state or tribal government, or from the United States Department of Agriculture, before producing hemp legally. Existing hemp registrations or licenses under the 2014 Farm Bill will expire at the end of 2019.

Hemp products for human consumption or topical use which are marketed in the United States remain subject to the jurisdiction of the Food and Drug Administration and the Federal Trade Commission. Hemp products shipped into or out of the United States remain subject to Customs and Border Patrol jurisdiction.

The domestic hemp industry continues to grow, with United States farmers planting nearly 80,000 acres of hemp and selling nearly $1 billion in hemp products in 2018. The hemp market is projected to grow nearly 100% by 2022.

II. State Hemp Laws

To date, 41 states have passed laws related to hemp, and 39 states have passed laws authorizing the production of hemp in one form or another. Nevertheless, the hemp industry is still very young and many of these states do not have active hemp cultivation programs as of 2019.

States cannot prohibit the interstate transport of hemp which was grown in accordance with a USDA-approved state, tribal or federal plan under the 2018 Farm Bill. Courts have held that hemp grown under the 2014 Farm Bill does not receive the same protections for interstate transportation. Furthermore, state laws vary on the legality of possession, distribution, and authorized uses of hemp, and certain states continue to prohibit or criminalize hemp. In 2019, local and state police in Oklahoma, Idaho and Wyoming have seized hemp shipments and charged the drivers for state law marijuana crimes.

a. Colorado

Industrial hemp grown in Colorado must be grown under a registration from Colorado Department of Agriculture. Private growers, including business entities and/or sole proprietors, engaged in the sale of hemp must apply for a commercial registration from the CDA, and universities must apply for research and development registrations.

b. California

The California Department of Food and Agriculture (“CDFA”) is developing a program to administer the state’s Industrial Hemp Farming Act. Until this occurs, there is no effective registration process for private commercial growers. Only established agricultural research institutions, including public and private institutions, are exempt from registration and may currently grow hemp in California. When registration is available, which could be as soon as spring 2019, private growers must register with their local county agricultural commissioner, rather than with the CDFA.

III. Hemp-derived Cannabidiol (“CBD”)

a. Federal Law

CBD has become the most popular hemp product. The Farm Bill included CBD within its definition of legal hemp, so CBD derived from hemp and possessing a THC concentration no more than 0.3% is not subject to the federal Controlled Substances Act. The Food and Drug Administration does not authorize sales of CBD as a dietary supplement or food additive. The labeling and marketing of CBD products remains challenging as a result of FDA’s position and engaging in this activity requires a thoughtful approach with counsel from an experienced lawyer.

b. State Laws

Over 20 states allow CBD possession and use for the treatment of various medical ailments. CBD distributors, retailers, or processors, have suffered raids by state regulators and law enforcement, including raids by the Texas Department of Public Safety, and local police raids of CBD retailers in Kansas and Nebraska. State laws on CBD are developing rapidly, and numerous states have pending legislation in 2019 to address the legality of CBD.

CBD can be produced in Colorado under the relevant licensing regimes for either marijuana or hemp. Colorado did not specifically legalize CBD, however, state law compliant CBD products are legal under the broader state laws for marijuana and hemp. Local laws in Colorado, however, may impact CBD sales. For example, the city and county of Denver prohibit the sale of CBD products manufactured without health department sanitation approval which are intended for human consumption. If you would like to discuss the regulations concerning production or sale of CBD products, please contact us to consult with an attorney regarding the risks and opportunities.

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Disclaimer: The information on this website is for informational purposes only. This website should not be taken as legal advice. Prior results do not guarantee a similar outcome. This information should not be taken as the formation of a lawyer or attorney client relationship.